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Mon, July 22

Rising prices fueling headaches for consumers

Jason Soifer/The Daily Courier<br>
Fuel prices in the tri-city area are flirting with the $3 mark as many factors make up prices, including civil unrest and demand.

Jason Soifer/The Daily Courier<br> Fuel prices in the tri-city area are flirting with the $3 mark as many factors make up prices, including civil unrest and demand.

Rising fuel prices hit people like Stephanie Nehls hard.

Nehls stood outside her car at the Fry's supermarket gas station in Prescott Valley Monday afternoon expressing her displeasure with fuel prices that are flirting with the $3 mark.

After spending nearly $30 for less than 11 gallons of gasoline, Nehls said rising prices translate into more time at home.

"It means I don't have money to drive anywhere," she said.

Michelle Donati, spokesperson for AAA Arizona, said the ingredients that go into setting gas prices are complex and a bit nebulous.

While crude oil prices have been treading in the $80 to low $90 per barrel range for the past several weeks, Donati said the commodity's price makes up more than half of the cost of a gallon of gasoline. Other ingredients in the price include rising demand from global economies as they come out of the worldwide recession to the value of the dollar, seasonal use and civil unrest in places like Egypt.

Egypt isn't a major oil producer, but it is a key point of transit for the commodity for the global oil supply with the Suez Canal and the Sumed Pipeline, which is an alternative to the canal for moving oil from the Persian Gulf to the Mediterranean.

Both are still running at this time without any disruption, but Donati said any unrest in oil sensitive areas impacts fuel prices.

The statewide average fell from $3.004 per gallon this past week to $2.998 this week, according to Donati.

While the winter months usually see gasoline demand dip because people cut back on their travel plans, Donati said the outlook for prices to drop isn't good, considering the state is already roughly 20 cents above its high point of $2.72 set this past May.

"It is unlikely that prices are going to shift downward substantially," she said. "Given what we've seen historically, prices are likely to climb this summer."

Ronald Gunderson, professor of economics at Northern Arizona University, said rising fuel prices also have a psychological impact on people.

Gunderson said that as fuel prices hit new dollar marks, it changes how some consumers look at their fuel use.

"That does change people's thinking and to some extent, a little bit of their behavior," he said Monday. "Since it's a product that we need, obviously in the short-term at least, people can't cut back on their gasoline."

Adding to it are consumers struggling to reconcile rising prices with reports that American oil companies are posting big increases in fourth-quarter profits.

Exxon Mobil's quarterly profit rose 53 percent, Chevron reported late this past week that fourth quarter earnings were 72 percent above the preceding year, and ConocoPhillips reported quarterly profits rose 46 percent, according to The New York Times.

Gunderson said the big oil companies have little competition, market power and can sway the market.

"That is what the average person's going to think and in most cases that's accurate," he said.

It all leaves consumers like Steve Lee with little alternative but to go with it.

"We're constantly spending money on food and gas," he said. "Everything that depends on gas goes up."


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